5 Questions To Ask Before Going Into Business With A Friend

Pamela Skaist-Levy and Gela Nash-Taylor, co-presidents and co-founders of Juicy Couture became famous for their celebrated casual clothing line, which they went on to sell in 2013 for a whopping $195 million. Sure, their story of success has had its share of ups and downs—like any other business—but according to the best friends, the greatest decision they ever made was to go into business together. Noted Skaist-Levy, “You spend more time with a business partner than almost anyone…When you’re together, the highs are even higher and the lows don’t seem so bad.”

As great as this kind of 50/50 arrangement sounds, so many partnerships, especially among friends, don’t survive. In fact if you research how to start a business with a friend, you’ll see that expert after expert likens business partnership to marriage: Are you willing to hang in there with this person through the celebrations and failures? The curveballs and the monotony? Can you accept that the little things about them that may annoy you now could only magnify under stress?

Open Sign (Photo credit: dlofink)

If you’re considering your own friend-based startup, asking and answering these kinds of questions is exactly what you should be doing. Here’s my own list of questions—the big five—for you to carefully think through before taking the plunge together:

To What Extent Do You Trust Your Partner? Where there’s friendship, hopefully there’s trust. But you should ask yourself just how much you trust your potential partner. Most of the time? With your life? On and off? Zero in on what area, if any, gives you pause and think through what would happen if your partner lapsed in judgment. Is it something you can live with? On the other hand, would it decimate your company’s credibility? If your partner tends to overpromise slightly on deliverables, that’s one thing, but if they dance on a line that’s unethical, that could be quite another.

How Will They Exemplify Your Brand? As you hone your company’s identity and distill your service or products down to the essentials, think through how your partner will personify your brand. Experienced Advertising Executive and Assistant Professor at the Temple University School of Media and Communication Stacey Harpster, advises, “…Ensuring that your new partner fully embraces your brand tenets, avidly enforces your brand standards and consistently delivers on your brand promise is vital for your business’ success. A strong brand cannot exist unless the leadership is unified…in living the brand at all times.” If, for example, your partner is technically brilliant but appears disorganized or disheveled in front of clients, it will hurt your brand authority.

Do They Have a Key Skill or Selling Point You Don’t? At the end of the day, your partner should have a compelling value proposition that you lack. Be strategic about what you need whether it’s executive experience, the cache of a big company name or someone with vast contacts. Startup consultant George Deeb advises, “If you are launching a new search engine and you have a
Google engineer on your staff, that will get a VC’s attention. …The VCs will be impressed by your hiring skills (finding the best talent) and your sales skills (getting these proven winners to buy into your vision). This kind of team around the management table is exactly what the VCs want in order to ensure that your business is more than a ‘one-man show.’”

Are They In A Stable Place In Life? There’s a reason that 60% of employers check a potential employee’s credit score and history. How a person handles their own finances may seem like a private matter—but in a startup, your own bottom line becomes more public, especially between owners. Your partner need not be wealthy necessarily, but if they’re in dire straits, you could end up in a situation where rather than bouncing back from a failure, you’re forced to close your doors. Similarly, if your potential partner is in the beginning, let’s say, of a bitter and drawn out divorce, it will be incredibly difficult for this matter not to spill into your business arrangement. During times of major turbulence in your life, think about how grounding a stable, calm person could be. That’s the kind of person you want in your corner!

Can You Do a Beta Test? In the best situations, you and your partner can do a pilot or trial before fully committing to your startup. Recommends Melinda Emerson, author of Become Your Own Boss in 12 Months: A Month-by-Month Guide to a Business that Works, “It's best to test the relationship so that you can see how your potential partner works with you on a project. You need to know if he or she is a person of action or if they need instruction. Are they an ‘in-charge’ kind of person who always needs to be the leader? Can they follow your lead sometimes?” A pilot or beta project would reveal just the answers you need to these kinds of questions, a necessity before committing your energy and capital to a startup.

Along with envisioning what would happen if the company were to become wildly successful, you also need to think about what will happen if things go south. According to web entrepreneur Marie Forleo, “The best partnerships handle the worst case scenarios in advance.” Don’t wait to engage a lawyer when you’re in trouble or it can often be too late. Bring them in at the beginning, helping you to draft an agreement of your roles, capital investments, and exit strategies. Agree as partners to operate on a no-surprise basis, something that’s easier to do if you have built-in communication routines every week.

What would you add? What have you learned from seeing friends run businesses together?